# The Porter Casino Resort, Inc. v. Georgia Gaming Investment, LLC

> District Court, W.D. Tennessee · June 25, 2021

URL: https://www.frixlaw.com/law-library/cases/10440605

## Case

- **Court:** District Court, W.D. Tennessee
- **Decided:** June 25, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10440605

## Opinion text

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

)
THE PORTER CASINO RESORT, )
INC., )
)
Plaintiff, )
)
v. ) No. 2:18-cv-02231-SHM-atc
)
GEORGIA GAMING INVESTMENT, )
LLC, and TENNESSEE HOLDING )
INVESTMENTS, LLC, )
)
Defendants, )
)
and )
)
GEORGIA GAMING INVESTMENT, )
LLC, and TENNESSEE HOLDING )
INVESTMENTS, LLC, )
)
Counter-Plaintiffs/Third )
Party Plaintiffs, )
)
v. )
)
THE PORTER CASINO RESORT, )
INC., )
)
Counter-Defendant, )
)
and )
)
M. COLE PORTER, Individually, )
and CHICAGO TITLE AND TRUST )
COMPANY, )

Third Party Defendants.

ORDER
This is a contract case. Before the Court is The Porter
Casino Resort, Inc.’s (“Porter Casino”) January 27, 2021 Motion
for Summary Judgment (“Porter Casino’s Motion”). (D.E. No. 104).
Defendants Georgia Gaming Investment, LLC (“Georgia Gaming”),
and Tennessee Holding Investments, LLC (“Tennessee Holding”),
(collectively “Defendants”) responded on February 24, 2021.

(D.E. No. 109.) Also before the Court is M. Cole Porter’s
(“Porter”) January 27, 2021 Motion for Summary Judgment
(“Porter’s Motion”). (D.E. No. 103.) Defendants responded on
February 24, 2021. (D.E. No. 111.) For the following reasons,
Porter’s Motion is GRANTED, and Porter Casino’s Motion is GRANTED
in part and DENIED in part.
I. Background and Procedural History
This case arises from Porter Casino’s attempt to purchase
the Majestic Star Casino. (See D.E. No. 109-7, 27.) Porter is
the founder, president, CEO, and sole shareholder of Porter
Casino. (D.E No. 103-8, ¶ 4.) Porter Casino was created “to
conduct business in furtherance of purchasing a casino resort.”

(Id. at ¶ 5.) Porter has sworn that his only involvement in the
Majestic Star Casino transaction was in his capacity as an
officer of Porter Casino. (Id. at ¶¶ 8-9.)
Initially, Porter was the sole shareholder in Porter Casino.
(D.E. No. 109-7, 8.) George Stadler became a shareholder, but
surrendered his shares. (Id. at 8.) Two other people were
offered shares, but the shares were never issued. (Id. at 9.)
On August 29, 2017, Porter Casino entered into a
subscription agreement with each Defendant. (See D.E. No. 104-
2; D.E. No. 104-4.) Under the subscription agreements, Porter
Casino would issue stock to Defendants in exchange for

Defendants’ investing in Porter Casino. (D.E. No. 104-2, ¶¶ 4-
5; D.E. No. 104-4, ¶¶ 3-4.) Defendants would then have
representation on Porter Casino’s board of directors. (D.E. No.
104-2, ¶ 5; D.E. No. 104-4, ¶ 5.)
The subscription agreements were “subject to the terms and
conditions of separate Letters of Intent” each Defendant signed
with Porter Casino. (D.E. No. 104-2, ¶ 4; D.E. No. 104-4, ¶ 4.)
Defendant Tennessee Holding’s letter was “made in conjunction
with and subject to the terms and conditions” of Defendant
Georgia Gaming’s letter. (D.E. No. 104-3, ¶ 1.) Defendant
Georgia Gaming’s letter did not contain that clause. (See D.E.

No. 104-5, ¶ 1.) Defendants were to invest $3,000,000 for pre-
acquisition costs and, if needed, an additional $1,000,000 for
temporary operating capital. (D.E. No. 104-3, ¶ 2; D.E. No.
104-5, ¶ 1.) The obligation to invest in Porter Casino expressed
in the letters of intent was conditioned on Porter Casino’s
completing its purchase of the Majestic Star Casino. (D.E. No.
104-3, ¶ 8; D.E. No. 104-5, ¶ 7.) The investment was also
conditioned on Porter Casino’s having a binding commitment for
purchase money from a lender acceptable to Defendants. (D.E.
No. 104-3, ¶ 9; D.E. No. 104-5, ¶ 8.) Each Defendant was
obligated to deposit $500,000 into an escrow account. (D.E. No.
104-3, ¶ 10; D.E. No. 104-5, ¶ 9.) Disbursement was to be
governed by an escrow agreement dated September 8, 2017. (D.E.

No. 104-3, ¶ 11; D.E. No. 104-5, ¶ 10.)
The escrow agreement was among Chicago Title, Porter Casino,
and the Majestic Star Casino. (D.E. No. 109-7, 27; D.E. No.
109-6.) Defendants are not referenced in it. (See D.E. No.
109-7; D.E. No. 109-6.) Porter Casino never signed a purchase
and sale agreement, but it signed a letter of intent with the
Majestic Star Casino. (Id. at 11.) The parties have not
submitted Porter Casino’s letter of intent to purchase the
Casino.
Porter Casino was unable to satisfy the contractual
requirements for committed debt and committed equity. (Id.)

Thomas F. Fricke (“Fricke”), general counsel of Porter Casino,
testified that Defendants caused both potential sources of
financing to withdraw. (Id.) Fricke testified that Defendants
corresponded with the seller of the Majestic Star Casino and the
escrow agent, which caused the seller and the lender to end their
negotiations with Porter Casino. (Id. at 22-23.)
On November 30, 2017, Defendants entered into termination
agreements with Porter Casino. (D.E. No. 109-4; D.E. No. 109-
5.) The termination agreements required Porter Casino to refund
$1,500,000 to Defendants. (D.E. No. 109-4, ¶ 2; D.E. No. 109-
5, ¶ 2.) The termination agreements, except for the escrow
conditions in paragraph 3, were not binding until the $1,500,000

was refunded. (D.E. No. 109-4, ¶ 2; D.E. No. 109-5, ¶ 2.) The
escrow conditions prohibited Porter Casino from continuing to
negotiate for the purchase of the Majestic Star Casino without
refunding the agreed $1,500,000 to Defendants or receiving their
approval. (D.E. No. 109-4, ¶ 3; D.E. No. 109-5, ¶ 3.) Porter
Casino was required to update Defendants regularly on the funding
of the refund. (D.E. No. 109-4, ¶ 3; D.E. No. 109-5, ¶ 3.)
Porter has sworn that the escrow deposit paid to Porter Casino
has been exhausted because the funds were used to pay Porter
Casino’s corporate debt obligations. (D.E. No. 103-8, ¶ 10.)
On February 27, 2018, Plaintiff Porter Casino filed its

Complaint in the Chancery Court of Tennessee for the Thirtieth
Judicial District at Memphis. (See D.E. No. 1, 1.) On April 6,
2018, Defendants removed to this Court. (Id.) On January 22,
2019, Porter Casino filed its Amended Complaint. Porter Casino
brings five claims. (D.E. No. 50, ¶¶ 18-43.) The first is a
claim for breach of contract because Defendants failed to perform
their obligations under the subscription agreements.1 (Id. at
¶¶ 18-20.) The second is a claim for breach of implied covenant
of good faith and fair dealing because Defendants prevented
Porter Casino from purchasing the Majestic Star Casino. (Id. at
¶¶ 21-25.) The third is a claim for tortious interference with
a business relationship because Defendants interfered with the

Majestic Star Casino purchase. (Id. at ¶¶ 26-32.) The fourth
is a claim for tortious interference with a business relationship
because Defendants interfered with the financing of the Majestic
Star Casino purchase. (Id. at ¶¶ 33-39.) The fifth is a claim
for a declaration that Defendants have breached the subscription
agreements, Porter Casino has not breached the subscription
agreements, Porter Casino is entitled to damages, and Porter
Casino may retain all funds Defendants paid. (Id. at ¶¶ 40-43.)
On April 13, 2018, Defendants filed a motion to dismiss for
lack of jurisdiction. (D.E. No. 7.) Porter Casino responded on
May 10, 2018. (D.E. No. 9.) On September 21, 2018, the Court

denied the motion. (D.E. No. 20.)
On November 26, 2018, Defendants filed their Counterclaims
and Third Party Claims. (D.E. No. 40.) Defendants bring five
Counterclaims against Porter Casino. (Id. at 21-31 ¶¶ 30-58.)
The first is for breach of contract for Porter Casino’s breach

1 The subscription agreements are also known as the “investment
agreements.” (See D.E. No. 40, 21 ¶¶ 32.)
of the subscription agreements. (Id. at 21-22 ¶¶ 30-33.) The
second is for breach of contract for Porter Casino’s breach of
the termination agreements. (Id. at 22-23 ¶¶ 34-37.) The third
is for fraud because Porter Casino made misrepresentations that
Defendants relied on to enter into the subscription agreements.
(Id. at 23-26 ¶¶ 38-43.) The fourth is for conversion, trover,

and misappropriation because Porter Casino took possession of
the escrow deposit. (Id. at 26-28 ¶¶ 44-50.) The fifth is for
interpleader. (Id. at 28-31 ¶¶ 51-58.)
Defendants bring five Third Party Claims against Porter and
Chicago Title and Trust Company (“Chicago Title”). (Id. at 32-
43 ¶¶ 5-38.) The first is for interpleader against Porter. (Id.
at 32-34 ¶¶ 5-9.) The second is for Section 10(b) securities
violations against Porter and Porter Casino because Porter Casino
and Porter made deceptive and manipulative statements in a
securities transaction.2 (Id. at 34-35, ¶¶ 10-16.) The third
is for fraud against Porter based on statements he made to

Defendants in his individual capacity. (Id. at 36-37, ¶¶ 17-
23.) The fourth is for conversion, trover, and misappropriation
against Porter because the escrow deposit was diverted. (Id. at
39-40, ¶¶ 24-29.) The fifth is for breach of contract against

2 Defendants purport to bring their Section 10(b) securities
fraud claim against Porter Casino as a Third Party Claim. (See
D.E. No. 40, 35 ¶ 11.)
Chicago Title and Porter Casino for breach of the escrow
agreement.3 (Id. at 41-43, ¶¶ 30-38.)
On February 22, 2019, Chicago Title filed a motion to
dismiss for failure to state a claim. (D.E. No. 53.) On April
23, 2019, Defendants responded. (D.E. No. 65.) On May 2, 2019,
Chicago Title replied. (D.E. No. 67.) The Court granted Chicago

Title’s motion and dismissed it from the case. (D.E. No. 68.)

II. Jurisdiction and Choice of Law
The Court has diversity jurisdiction under 28 U.S.C. § 1332.
A federal district court has original jurisdiction of all civil
actions between citizens of different states “where the matter
in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs.” 28 U.S.C. § 1332(a)(1).
Plaintiff is a Tennessee corporation with its principal
place of business in Tennessee. (D.E. No. 50, 1 ¶ 1) Defendant
Georgia Gaming is a Georgia limited liability company. (D.E.
No. 19.) Its two members reside in Georgia. (Id.) See V & M

Star, LP v. Centimark Corp., 596 F.3d 354, 356 (6th Cir. 2010)
(“[L]imited liability companies ‘have the citizenship of each
partner or member.’” (quoting Delay v. Rosenthal Collins Grp.,

3 Defendants purport to bring their breach of escrow claim
against Porter Casino as a Third Party Claim. (See D.E. No.
40, 41-43, ¶30-38.)
LLC, 585 F.3d 1003, 1005 (6th Cir. 2009))). Defendant Tennessee
Holding is a Georgia limited liability company. (D.E. No. 18.)
Its sole member resides in Georgia. (Id.) See V & M Star, LP,
596 F.3d at 356. There is complete diversity. 28 U.S.C. §
1332(a)(1) (diversity exists when the parties are citizens of
different states).

Plaintiff seeks “not less than $1,500,000, plus such
interest as allowed by law, attorneys fees and damages as allowed
by law.” (D.E. No. 50, 9 ¶ 2.) The amount in controversy is
satisfied. Cf. 28 U.S.C. § 1332(a)(1). The Court has diversity
jurisdiction.
The subscription agreements Defendants signed include a
choice of law provision that designates Tennessee law. (D.E.
No. 104-2, ¶ 6; D.E. No. 104-4, ¶ 6.)
III. Standard of Review
Under Federal Rule of Civil Procedure 56(a), a court must
grant a party’s motion for summary judgment “if the movant shows
that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). The moving party must show that the nonmoving
party, having had sufficient opportunity for discovery, lacks
evidence to support an essential element of its case. See Fed.
R. Civ. P. 56(c)(1); Peeples v. City of Detroit, 891 F.3d 622,
630 (6th Cir. 2018).
When confronted with a properly supported motion for summary
judgment, the nonmoving party must set forth specific facts
showing that there is a genuine dispute for trial. See Fed. R.
Civ. P. 56(c). “A ‘genuine’ dispute exists when the plaintiff
presents ‘significant probative evidence’ ‘on which a reasonable
jury could return a verdict for her.’” EEOC v. Ford Motor Co.,

782 F.3d 753, 760 (6th Cir. 2015) (en banc) (quoting Chappell v.
City of Cleveland, 585 F.3d 901, 913 (6th Cir. 2009)). The
nonmoving party must do more than simply “show that there is
some metaphysical doubt as to the material facts.” Lossia v.
Flagstar Bancorp, Inc., 895 F.3d 423, 428 (6th Cir. 2018)
(quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586 (1986)).
Although summary judgment must be used carefully, it “is an
integral part of the Federal Rules as a whole, which are designed
to secure the just, speedy, and inexpensive determination of
every action[,] rather than a disfavored procedural shortcut.”

FDIC v. Jeff Miller Stables, 573 F.3d 289, 294 (6th Cir. 2009)
(quotation marks and citations omitted).
IV. Analysis
A. Standing
Porter and Porter Casino argue that Defendants lack standing
to bring their Counterclaims and Third Party Claims because
Defendants have not obtained a certificate of authority from
Tennessee.
Under Tennessee law, “[a] foreign LLC transacting business
in this state without a certificate of authority may not maintain
a proceeding in any court in this state until it obtains a
certificate of authority.” Tenn. Code Ann. § 48-246-601(a). The

proceedings may be stayed until the foreign LLC obtains a
certificate. Tenn. Code Ann. § 48-246-601(c); Saintsbury
Holdings, LLC v. RMC, LLC, No. 1:06-CV-00014, 2006 WL 1900317 at
*4 (M.D. Tenn. July 11, 2006) (“Plaintiff's lack of a certificate
of authority, if required, does not require dismissal, but can
justify a stay of the proceedings”). However, “the failure of
a foreign LLC to obtain a certificate of authority does not
impair” “[t]he foreign LLC from defending any action, suit, or
proceeding in any court of the state of Tennessee.” Tenn. Code
Ann. § 48-246-601(f)(3).
A nonregistered defendant may bring counterclaims. The

Tennessee Court of Appeals has considered whether a defendant’s
lack of a certificate of authority requires the dismissal of the
defendant’s counterclaim. Battery All., Inc. v. Allegiant Power,
LLC, No. W201502389COAR3CV, 2017 WL 401349 at *6 (Tenn. Ct. App.
Jan. 30, 2017). The court concluded that the defendant could
bring a counterclaim without a certificate of authority because
it “was merely asserting the counterclaim as a defense to the
action filed against it in the Tennessee court.” Id. The court
relied on a Arcata Graphics, a case addressing a statute on
foreign corporations, which the Battery All. court held was
“substantially similar” to the statute governing foreign LLC’s.
Id. at n. 2, n. 3. In Arcata Graphics, the court held that “[the
defendant] had been sued in Tennessee courts and was merely

asserting as a defense a counterclaim, which arose out of the
same transaction.” Arcata Graphics Co. v. Heidelberg Harris,
Inc., 874 S.W.2d 15, 22 (Tenn. Ct. App. 1993).
Defendants bring Third Party Claims against Porter and
Counterclaims against Porter Casino. Porter Casino’s Claims and
Defendants’ Counterclaims are part of the same transaction, the
purchase of the Majestic Star Casino. Defendants’ Counterclaims
against Porter Casino, the Plaintiff in this case, are permitted
because the Counterclaims arise out of the same transaction as
Plaintiff’s Claims. Defendants’ Third Party Claims against
Porter are defenses to Porter Casino’s underlying claims because

Porter Casino’s Claims and the Third Party Claims are based on
the same transaction and explain why the full investment was
never funded. Defendants have standing to bring their
Counterclaims and Third Party Claims against Porter and Porter
Casino.4

4 Defendants have pending applications for certificates of
authority. (See D.E. No. 109-1, ¶¶ 3-4.)
B. Piercing the Corporate Veil
Porter argues that Defendants’ Third Party Claims against
him must be dismissed. He argues that he has no personal
liability for the debts or actions of Porter Casino because
Defendants fail to show that the corporate veil should be
pierced.

Under Tennessee law, “a corporation and its shareholders
are distinct entities.” Cambio Health Sols., LLC v. Reardon,
213 S.W.3d 785, 790 (Tenn. 2006). The separate legal status of
a corporation generally protects its shareholders from liability
for the corporation’s debts and financial obligations. Id.;
Tenn. Code Ann. § 48-16-203(b) (“The shareholder of a corporation
is not personally liable for the acts or debts of the corporation
except that the shareholder may become personally liable by

reason of the shareholder’s own acts or conduct”). A plaintiff
may persuade “a court to disregard the separate corporate entity,
also known as ‘piercing the corporate veil.’” Cambio, 213
S.W.33d at 790; Tenn. Code Ann. § 48-16-203(b). “The doctrine
of piercing the corporate veil applies equally to cases in which
a party seeks to pierce the veil of a limited liability company.”
Edmunds v. Delta Partners, L.L.C., 403 S.W.3d 812, 828-829 (Tenn.
Ct. App. 2012) (citing In re Steffner, 479 B.R. 746, 755 (Bkrtcy.
E.D. Tenn. 2012)).
Defendants bring their Third Party Claims against Porter in
his individual capacity. (D.E. No. 40 ¶ 8; ¶ 11; ¶ 18; ¶ 25.)
Piercing the corporate veil is used to hold a shareholder liable
for the acts or debts of the corporation. See Cambio, 213
S.W.33d at 790; Tenn. Code Ann. § 48-16-203(b). Porter is not
entitled to dismissal of Defendants’ Third Party Claims under

the doctrine of piercing the corporate veil because Defendants’
Third Party Claims are based on Porter’s own actions.
C. Breach of Subscription Agreements
Porter Casino argues that it is entitled to summary judgment
on Defendants’ Counterclaim for breach of the subscription
agreements because Porter Casino’s breach was anticipatory.

Under Tennessee law, a breach of contract claim requires
proof of “the existence of a valid and enforceable contract, a
deficiency in the performance amounting to a breach, and damages
caused by the breach.” Fed. Ins. Co. v. Winters, 354 S.W.3d
287, 291 (Tenn. 2011). Interpretations of unambiguous contract
terms are issues of law and may be decided on summary judgment.
Bourland, Heflin, Alvarez, Minor & Matthews, PLC v. Heaton, 393
S.W.3d 671, 674 (Tenn. Ct. App. 2012). “Whether a party has

fulfilled its obligations under a contract or is in breach of
the contract is a question of fact.” Forrest Const. Co., LLC v.
Laughlin, 337 S.W.3d 211, 225 (Tenn. Ct. App. 2009).
Porter Casino is not entitled to summary judgment based on
its argument that any breach it committed was anticipatory. Each
subscription agreement was subject to the terms and conditions
of a letter of intent signed by one of the Defendants. (D.E.
No. 104-2, ¶ 4; D.E. No. 104-4, ¶ 5.) Under the terms of the
letters of intent, Defendants’ capital investment was

“conditioned upon the completion of all the terms and conditions
described in the Casino LOI, including but not limited to a Sale
Commitment, completion of all due diligence, and the execution
of a definitive Purchase and Sale Agreement, all as more
particularly described in the Casino LOI.” (D.E. No. 104-3, ¶
8; D.E. No. 104-5, ¶ 7.) The letters of intent were conditioned
on Porter Casino’s having a binding commitment from a lender
acceptable to Defendants to fund the purchase of the Majestic
Star Casino. (D.E. No. 104-3, ¶ 9; D.E. No. 104-5, ¶ 8.)
Defendants expressed concern to Porter Casino about its ability
to purchase the Casino and did not fully invest in Porter Casino.

(See D.E. No. 109-7, 8.) Porter Casino alleges that Defendants
caused the purchase of the Majestic Star Casino to fail. (D.E.
No. 50, ¶¶ 14-17; D.E. No. 109-7.)
Defendants’ Counterclaim cannot be decided based on
unambiguous contract terms. The Counterclaim turns, in part, on
whether the parties fulfilled their contractual obligations.
That is a question of fact. Summary judgement is not
appropriate.

The moving party has the burden of showing that there is no
genuine dispute of material fact. Pittman v. Experian Info.
Sols., Inc., 901 F.3d 619, 627 (6th Cir. 2018). Porter Casino
has not met its burden.
Porter Casino’s Motion is DENIED on the breach of the
subscription agreements Counterclaim.

D. Breach of Termination Agreements and Breach of Escrow
Agreement
Porter Casino argues that Defendants have failed to state
a claim for breach of the termination agreements and breach of
the escrow agreement because Defendants did not attach the
termination agreements and escrow agreement to their
Counterclaim.
In Northampton Restaurant, the Sixth Circuit affirmed the

trial court’s dismissal of a claim for breach of contract where
the plaintiff did not attach the contract to the complaint or
“include the language of any specific contractual provisions.”
Northampton Rest. Grp., Inc. v. FirstMerit Bank, N.A., 492 F.
App’x 518, 521-522 (6th Cir. 2012). The court decided that the
plaintiff had failed to state a claim because the plaintiff could
not allege sufficient facts to support its breach of contract
claim without the contract or without including the language of
the contract in the complaint. Id. The plaintiff had lost the
contract and was not permitted to engage in discovery to obtain
it. Id. Courts may consider a contract when it is attached to
a brief in deciding a motion to dismiss. See Miles-McClellan
Constr. Co., Inc. v. Kenny/Obayashi, No. 2:16-CV-577, 2017 WL

3209524 (S.D. Ohio Mar. 29, 2017).
This case has moved beyond the dismissal stage. Discovery
has been taken. Defendants have disclosed the termination
agreements and the escrow agreement. (See D.E. No. 109-4; D.E.
No. 109-5, D.E. No. 111-4; D.E. No. 111-5; D.E. No. 109-6.) A
party may rely on materials in the record, including documents,

in responding to a summary judgment motion. See Fed.R.Civ.P.
56(c)(1). Disclosing the termination agreements and the escrow
agreement satisfies the requirement that the contract or contract
language be provided by the party bringing a breach of contract
claim.
Porter Casino’s Motion is DENIED on the breach of the
termination agreement Counterclaim and the breach of the escrow

agreement Third Party Claim.
E. Fraud
Porter Casino and Porter argue that Defendants have not
pled fraud with the specificity required by Federal Rule of Civil
Procedure 9(b).

Claims of fraud are governed by Rule 9(b)’s heightened
pleading standard and must be pled with particularity. Under
Rule 9(b), “[i]n alleging fraud or mistake, a party must state
with particularity the circumstances constituting fraud or
mistake. Malice, intent, knowledge, and other conditions of a
person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). To
satisfy Rule 9(b), a plaintiff is required “(1) to specify the
allegedly fraudulent statements; (2) to identify the speaker;
(3) to plead when and where the statements were made; and (4) to
explain what made the statements fraudulent.” Republic Bank &

Tr. Co. v. Bear Stearns & Co., 683 F.3d 239, 247 (6th Cir. 2012).
Courts may consider Rule 9(b) when deciding summary judgment
motions. See Turner v. Speyer, No. 3:08 CV 1304, 2009 WL 2579420
at *6 (N.D. Ohio Aug. 18, 2009) (granting summary judgment on a
fraud counterclaim based on Rule 9(b)); In re Darvocet, No. 2:11-
MD-2226-DCR, 2015 WL 2451208 at *7-8 (E.D. Ky. May 21, 2015).

To prove fraud under Tennessee law, a plaintiff must prove
“(1) an intentional misrepresentation of a material fact, (2)
knowledge of the representation’s falsity, and (3) an injury
caused by reasonable reliance on the representation; and (4) the
requirement that the misrepresentation involve a past or existing
fact.” Smith v. BAC Home Loans Servicing, LP, 552 F. App’x 473,
478-479 (6th Cir. 2014) (quoting Dobbs v. Guenther, 846 S.W.2d
270, 274 (Tenn. Ct.App. 1992)).

Defendants’ allegations against Porter Casino satisfy Rule
9(b). Defendants allege that Porter Casino made material
representations that it “knew, or should have known, were false
and/or materially inaccurate and misleading.” (D.E. No. 40, ¶
40.) Defendants allege that Porter Casino misrepresented:

(i) that [Porter Casino] had binding financial
commitments and funding sources sufficient to complete the
acquisition of the Casino; (ii) that [Porter Casino] would
issue stock in and to Georgia Gaming and Tennessee Holding
in exchange for invested funds; (iii) that [Porter Casino]
would elect representatives of Georgia Gaming and Tennessee
Holding to the Board of Directors of PCR in exchange for
invested funds; (iv) that [Porter Casino] would be re-
capitalized and re-structured after investment of funds by
Georgia Gaming and Tennessee Holding; and (v) that [Porter
Casino] would refund Georgia Gaming and Tennessee Holding
the sum of $ 1,500,000.00, from either new investment
proceeds received by [Porter Casino] or a refund of the
Escrow Deposit, if Georgia Gaming and Tennessee Holding
would execute the Termination Agreement.
(D.E. No. 40, ¶ 40.)
Defendants allege that they relied on variations of Porter
Casino’s misrepresentations to enter into the subscription and
termination agreements. (Id. at ¶ 41.) Defendants allege that
Porter Casino assured Defendants that it had the funding and
financing commitments necessary to purchase the Majestic Star
Casino. (Id. at ¶ 11.) Defendants allege that Porter made false
and inaccurate statements in his individual capacity about
funding and the ability of Porter Casino to purchase the Casino.
(Id. at ¶¶ 19-20.) The allegations that Porter Casino and Porter
told Defendants that Porter Casino had financing when it did not

are sufficient to satisfy Rule 9(b).
Porter Casino also argues that summary judgment is
appropriate because there is no genuine dispute of material fact
about Defendants’ reliance on Porter Casino’s representations.
Porter Casino argues that the subscription agreements warned
Defendants that the investment was speculative and “involved a
high degree of risk of loss.” (D.E. No. 104-2; D.E. No. 104-4.)

Porter Casino also argues that, because the letters of intent
allowed Defendants to review Porter Casino’s records, any
misrepresentations would not have been material. (See D.E. No.
104-3; D.E. No. 104-5.)
Under Tennessee law, the party asserting fraud must, “when
confronted by a motion for summary judgment, [] produce some
competent and material evidence legally sufficient to support

his claim or defense.” Fowler v. Happy Goodman Fam., 575 S.W.2d
496, 499 (Tenn. 1978). Under federal law, when the moving party
demonstrates the basis for its motion, “[t]he nonmoving party
‘must set forth specific facts showing that there is a genuine
issue for trial.’” Pittman, 901 F.3d at 628 (quoting Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (internal
citations and quotation marks omitted)). Defendants cite no
evidence in response that shows Porter Casino made
misrepresentations that Defendants reasonably relied on.

Defendants cite their Counterclaims and Third Party Claims to
show the misrepresentations were fraudulent. (See D.E. No. 109,
9-14.) They cite exhibit 7 to Fricke’s deposition as evidence
that Porter Casino intended to defraud them because Porter Casino
spent the $1,500,000 on “payments to individuals and entities
other than [Defendants]”. (Id. at 12.) The mere fact that
Porter Casino later may have spent the contested money
inappropriately does not satisfy Defendants’ burden to show
intent. No affidavits, depositions, emails, or other documents
are cited to show that Defendants relied on any
misrepresentations by Porter Casino.

Porter argues that he is entitled to summary judgment
because Defendants provide no evidence that Porter acted in his
individual capacity and because Defendants cannot show
reasonable reliance. (D.E. No. 103-9, 12-16.) Defendants cite
no evidence other than the evidence cited in response to Porter
Casino. Defendants provide no evidence to support their
allegations that they relied on any misrepresentations by Porter
or that Porter made representations in his individual capacity.
Defendants argue that “[t]he multitude of facts pled by
[Defendants] also give rise to a strong inference that Porter
knowingly misrepresented such facts”. (D.E. No. 111, 11.) An
inference based on the pleadings is insufficient to survive

summary judgment.
Porter Casino’s Motion is GRANTED. Defendants’ fraud
Counterclaim is DISMISSED. Porter’s Motion is GRANTED.
Defendants’ fraud Third Party Claim is DISMISSED.

F. Section 10(b) Securities Violations
Section 10(b) of the Securities Exchange Act of 1934 governs
securities fraud. 15 U.S.C. § 78j. The relevant portion of
Section 10(b) reads as follows:

It shall be unlawful for any person, directly or
indirectly, by the use of any means or instrumentality of
interstate commerce or of the mails, or of any facility of
any national securities exchange—
****
(b) To use or employ, in connection with the purchase
or sale of any security registered on a national securities
exchange or any security not so registered, or any
securities-based swap agreement[,] any manipulative or
deceptive device or contrivance in contravention of such
rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the
protection of investors.
15 U.S.C. § 78j(b).
Securities fraud must be pled with specificity under Rule
9(b). In re Comshare Inc. Sec. Litig., 183 F.3d 542, 548 (6th
Cir. 1999). The “underlying rationale” of cases involving
pleading under 9(b) “is applicable to the summary judgment
setting as well.” Nolfi v. Ohio Kentucky Oil Corp., 562 F.Supp.
2d 904, 910 (N.D. Ohio 2008). “[A] plaintiff must allege, in

connection with the purchase or sale of securities, the
misstatement or omission of a material fact, made with scienter,
upon which the plaintiff justifiably relied and which proximately
caused the plaintiff’s injury. Comshare, 183 F.3d at 548. The
claim must meet the “more exacting pleading requirement imposed
by the Private Securities Litigation Reform Act of 1995
(“PSLRA”), 15 U.S.C. § 78u-4.” In re Yum! Brands, Inc. Sec.
Litig., 73 F. Supp. 3d 846, 858 (W.D. Ky. 2014), aff’d sub nom.
Bondali v. YumA Brands, Inc., 620 F. App’x 483 (6th Cir. 2015).
Under the PSLRA the plaintiff in a securities fraud case must

(1) ... specify each statement alleged to have been
misleading, the reason or reasons why the statement is
misleading, and, if an allegation regarding the statement
or omission is made on information and belief, the
complaint shall state with particularity all facts on
which that belief is formed [and]
(2) ... state with particularity facts giving rise to
a strong inference that the defendant acted with the
required state of mind.
Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008) (quoting
15 U.S.C. § 78u-4(b)(1),(2)). All the pled facts, taken
together, must “give rise to a strong inference of scienter” and
the court must consider “plausible opposing inferences.” Id. at
570-571 (citing Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551
U.S. 308, 321-322 (2007)). The movant must show that there is

a strong inference of scienter at the summary judgment stage.
See Brown v. Earthboard Sports USA, Inc., 481 F.3d 901, 916-917
(6th Cir. 2007).
Porter Casino argues that Section 10(b) does not apply
because the transaction at issue was a transfer of a security
rather than a sale and that the securities were not listed on a
stock exchange. Neither of those arguments is well taken.

Porter Casino has provided no support for its argument that an
investment of money in exchange for a transfer of securities is
not a purchase or sale. The term “sale” and “sell” “shall
include every contract of sale or disposition of a security or
interest in a security, for value.” 15 U.S.C. § 77b(a)(3).
Porter Casino and Defendants formed contracts to exchange
securities for value.

Porter Casino cites Morrison v. Nat'l Australia Bank Ltd.,
561 U.S. 247, 273 (2010), for the proposition that being listed
on an exchange is a precondition to the application of Section
10(b). The court in Morrison, however, held only that Section
10(b) does not apply extraterritorially because Section 10(b)
applies “only in connection with the purchase or sale of a
security listed on an American stock exchange, and the purchase
or sale of any other security in the United States.” Morrison,
561 U.S. at 273. Section 10(b) applies to the transaction at

issue in this case.
Defendants have failed to demonstrate a “strong inference
of scienter.” The nonmoving party must “adduce[] sufficient
evidence to withstand summary judgment.” Brown, 481 F.3d at 918-
919. Defendants allege that “[t]he actions, misrepresentations, and
manipulative and deceptive acts and statements of PCR and Porter
were accomplished with scienter.” (D.E. No. 40, 35 ¶ 15.)

Defendants also incorporate paragraphs 1-58 of the Counterclaim.
(Id. at 35 ¶ 13.) Defendants offer no evidence to support their
conclusory allegations or that give rise to a strong inference
of scienter. At the summary judgment stage, a party may not
rest on its pleadings, but must present probative evidence to
support its case.
Defendants’ Section 10(b) Third Party Claim against Porter

fails for the same reason. Defendants offer no probative
evidence to support their allegations or that give rise to a
strong inference of scienter.
Porter Casino’s Motion is GRANTED on the Section 10(b)
Counterclaim. Defendants’ Counterclaim is DISMISSED. Porter’s
Motion is GRANTED on the Section 10(b) Third Party Claim.
Defendants’ Third Party Claim is DISMISSED.

G. Conversion, Trover, and Misappropriation
Porter Casino’s argument for summary judgment on
Defendants’ conversion, trover, and misappropriation
Counterclaims is that Defendants did not attach the termination
agreements to the Counterclaims. For the reasons discussed in
Section D, that argument is not well-taken. Defendants have
provided the termination agreements.

Porter’s argument for summary judgment on Defendants’
conversion, trover, and misappropriation Third Party Claims is
that the subscription agreements preclude a finding of
conversion, trover, and misappropriation. Defendants argue that
a novation occurred because the termination agreements
superseded the subscription agreements.

Under Tennessee law, a “[n]ovation is the substitution of
a new obligation for an existing one or the substitution of a
third party for the existing obligor.” TWB Architects, Inc. v.
Braxton, LLC, 578 S.W.3d 879, 890 (Tenn. 2019). To establish a
novation, a party must show “(1) a previously valid obligation,
(2) the agreement of all parties to a new contract, (3) the
extinguishment of the old contract, and (4) a valid new
contract.” Id. at 891 (quoting 21 Steven W. Feldman, Tennessee
Practice Series Contract Law and Practice, § 3:42 (May 2019
Update) (internal quotations removed)).

“Conversion is the appropriation of tangible property to a
party's own use in exclusion or defiance of the owner’s rights.”
PNC Multifamily Cap. Institutional Fund XXVI Ltd. P’ship v. Bluff
City Cmty. Dev. Corp., 387 S.W.3d 525, 553 (Tenn. Ct. App. 2012).
To prove conversion, the plaintiff must show “(1) the
appropriation of another’s property to one’s own use and benefit,
(2) by the intentional exercise of dominion over it, (3) in
defiance of the true owner’s rights.” Id. “Trover lies for the
conversion of determinate sums . . . where there is an obligation

to keep the money intact or to deliver it.” Id. at 554.
Conversion may be described as misappropriation. See Id.
The Court need not reach the effect of the subscription and
termination agreements to decide this Third Party Claim against
Porter. When invoking the corporate veil, Porter argues that
nothing in Defendants’ Third Party Complaint shows he acted in
his individual capacity. Defendants have not offered any

evidence that Porter, in his individual capacity, might be liable
for conversion or trover. The only evidence cited is that Porter
was CEO and shareholder of Porter Casino and that the escrow
deposit was exhausted. (See D.E. No. 103-8, ¶¶ 4, 10.) In
response to a summary judgment motion, the nonmoving party “must
set forth specific facts showing that there is a genuine issue
for trial.” Pittman, 901 F.3d at 628 (quoting Anderson, 477
U.S. at 250 (internal citations removed)). Defendants have not
met their burden.

Porter Casino’s Motion is DENIED on Defendants’ conversion,
trover, and misappropriation Counterclaims. Porter’s Motion is
GRANTED. Defendants’ conversion, trover, and misappropriation
Third Party Claims against Porter are DISMISSED.

H. Interpleader
Porter Casino argues that it is entitled to summary judgment
on Defendants’ interpleader Counterclaim because Defendants did
not attach the termination agreements to their Counterclaims,
the subscription agreements permitted Porter Casino to use the
funds for its own benefit, and interpleader must be brought in
a judicial district in which one of the claimants resides.
Porter argues that he is entitled to summary judgment on
Defendants’ interpleader Third Party Claim because the money at
issue was disbursed to Porter Casino and interpleader must be
brought in the judicial district in which one of the claimants
resides.

Interpleader is an equitable proceeding. United States v.
High Tech. Prod., Inc., 497 F.3d 637, 641 (6th Cir. 2007).
Typically, a disinterested stakeholder deposits the disputed
property with the court. 28 U.S.C. § 1335; High Tech, 497 F.3d
at 642 n. 2. Federal law provides for statutory and rule
interpleader. Id. at 641 n. 1. The general principles of
applicability are the same for both. See id. Defendants have
pled both. (See D.E. No. 40, 28 ¶ 52.) The “primary test”
for whether interpleader is appropriate “is whether the
stakeholder legitimately fears multiple vexation directed

against a single fund [or property].” Id. at 642, quoting 7
Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal
Practice and Procedure, § 1704 (3d ed. 2001).
Defendants’ interpleader Counterclaim must be dismissed for
reasons other than those Porter and Porter Casino argue. There
is no disinterested stakeholder of disputed property. The escrow
account was deposited with Chicago Title, which has been

dismissed. (D.E. No. 68.) The money at issue has not been
deposited with the Court. (See D.E. No. 103-8, ¶ 10.) There is
no single fund. Porter Casino represents that it has exhausted
the funds. (Id.) Defendants are not at risk of multiple claims
because Defendants and Porter Casino are the only claimants.
(See D.E. No. 50.) There is no basis for an interpleader
Counterclaim against Porter Casino.

Defendants’ interpleader Third Party Claim against Porter
must be dismissed because, inter alia, he makes no claim against
any fund. For the reasons discussed as to Porter Casino, there
is no basis for an interpleader Third Party Claim against Porter.

Porter Casino’s Motion is GRANTED. Defendants’
interpleader Counterclaim is DISMISSED. Porter’s Motion is
GRANTED. Defendants’ interpleader Third Party Claim is
DISMISSED.
V. Conclusion
Porter Casino’s Motion is GRANTED in part and DENIED in

part. Defendants’ Counterclaims for fraud, Section 10(b) fraud,
and interpleader against Porter Casino are DISMISSED.
Porter’s Motion is GRANTED. Defendants’ Third Party Claims
against Porter are DISMISSED.
SO ORDERED this 25th day of June, 2021.

/ s/ Samuel H. Mays, Jr.
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10440605. Public record. Not legal advice.